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Full Length Research Paper
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Monetary
anchor for East Asia: Japan or United
States?
Chee-Heong Quah1*, Patrick
M. Crowley2 and Mohd. Nazari Ismail1
1Faculty
of Business and Accountancy, University of Malaya, Malaysia.
2College
of Business, Texas A&M University -
Corpus Christi, 6300 Ocean
Drive, Corpus Christi, TX, USA.
*Corresponding author. E-mail:
bruceleequah@yahoo.com,
quahch@um.edu.my.
Accepted 22 April, 2010 |
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Abstract |
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In this paper we apply the optimum currency area (OCA) criteria
to assess the suitability of whether the United States or Japan
would best serve as monetary anchor country for East Asian
countries. The criteria used are trade openness, business cycle
synchronisation, exchange rate volatility, inflation
convergence, and interest rate cycle synchronisation. The
‘performance’ of these two potential monetary anchor countries
is compared for three different economic periods: the
pre-crisis, the crisis, and the post-crisis period. Based on
ratings of 16 countries in the region, results suggest that the
United States might be the more fitting candidate to be the
anchor country.
Key words:
Optimum currency area, Asia, monetary union, business cycle,
Japan, anchor currency. |
